As another dose of Friday bid fever in the drugs sector gave the Footsie a boost, one broker took the opportunity to revisit takeover gossip for SABMiller, Britain’s biggest brewer.

Since first expressing its opinion three years ago that continental brewer ABInbev should bid for the Peroni-to-Miller beer group, Canaccord Genuity has seen that view become more widely held in the market.

Now it has reworked its analysis and concluded that the deal is still attractive and the rationale unchanged.

Buzz: SABMiller is a hot topic again after one broker took the opportunity to revisit takeover gossip for Britain's biggest brewer

Canaccord believes that a two year window has now opened within which a deal could either be done, or shelved for good.

ABInbev has to decide in the next 12-18 months whether to extend its Pepsi franchises in Latin American for a further 10 years and doing so, Canaccord thinks, would all but rule out a deal for SABMiller.

Conversely, the broker believes that if the Budweiser to Becks brewer decides not to extend that Pepsi deal, then it could simultaneously make a bid for the UK blue chip firm.

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Canaccord said it ascribes a 25 per cent likelihood to a bid for SABMiller at 4200p a share within two years and as a result it has raised its target price for the UK stock to 3800p from 3000p.

Given the 12 per cent potential upside in SABMiller shares to reach that target, Canaccord has upgraded its rating for the stock to buy from hold, but the stock fell up 2p to 3393p.

The broker said SABMiller’s best defence against a bid would be a strong share price which should be ‘good news for shareholders’.

The main takeover excitement, however, was for drug maker Shire which surged 633p higher to 4371p after confirming it had spurned a £27billion bid from US-based rival AbbVie.

AbbVie’s pursuit of Shire came in May at the same time as blue chip peer AstraZeneca was itself fighting off a £69billion takeover offer from US drugs giant Pfizer, which like AbbVie saw three bid approaches rejected.

As bid fever swept the sector once again, AstraZeneca shares added 26p to 4470p, while pharma peer GlaxoSmithKline gained 1.5p at 1591.5p. And medical devices maker Smith & Nephew, which has also been at the centre of US takeover speculation in recent months took on 14p at 1079p.

The merger and acquisition activity boost saw the FTSE 100 index close 17.09 points higher at 6825.20, extending a recent rally as other global markets moved ahead.

The FTSE 250 index ended 107.54 points stronger at 15,791.42. Blue chip gains were limited, however, as investors kept a close watch on the situation in Iraq after US President Barack Obama sent 300 military advisers to help Iraq’s government in its fight against Sunni militants.

Oil prices remained strong as the Islamist-led rebels surrounded a key oil refinery in northern Iraq, with Brent crude notching up its second weekly gain amid supply concerns surrounding the second biggest OPEC oil producer.

Commodity issues provided another prop for the Footsie led by precious metal producers, with Fresnillo up 12p to 847p and Randgold Resources ahead 78p at 4812p after gold prices held near two month highs with the Iraq situation.

The other focus in London was on the banking sector after conditional dealings began in TSB following the successful sale of a 35 per cent stake in the revived lender by parent Lloyds Banking Group. TSB closed at 290p.

Part-government owned Lloyds saw its shares slip 0.7p to 76.7p, while majority taxpayer-owned peer Royal Bank of Scotland was off 1.3p at 337.2p RBS is looking to flog off its reactivated Williams & Glyn business in the future.

Away from the big boys, high street photo booths operator Photo-Me International was in demand, adding 16.75p to 143.25p as investors welcomed its recent appointment of Liberum Capital as joint corporate broker alongside finnCap.

Among resources plays, Alecto Minerals was a good gainer, up more than 9 per cent, or 0.08p, to 0.9p after the group unveiled a 28 per cent increase in the gold resources on the Gourbassi area of its Kossanto Gold Project in Mali in West Africa.

But on the downside, iron ore producer Bellzone Mining shed more than 12 per cent, down 0.37p to 2.58p, after saying it was in dispute with a barge operator in West Africa, although it said it had not affected production.

Bellzone said its Forecariah joint venture in Guinea, which has delivered 268,000 tonnes of ore so far in 2014 and has 68,000 tonnes ready for shipping, was in dispute with an operator at the port of Konta about safety issues, efficiency of operations and charges raised by the shipper.